Five-year government-backed investment pays profits twice a year: Here’s how it works.
Dubai: The UAE has set the return on its second retail T-Sukuk at 5.06 per cent a year for a five-year term.
For residents considering the investment for the first time, the basic structure is straightforward. Investors can start with Dh1,000, receive profit payments every six months and, if they hold the sukuk until maturity, receive their principal back at the end of the five-year term, subject to the terms of the issuance.
Subscriptions open on September 23 and close on September 28, with the UAE Ministry of Finance targeting Dh50 million from the new issuance.
So, how much could you receive?
At the stated annual profit rate of 5.06 per cent, a Dh1,000 investment would generate Dh50.60 in profit over a full year.
With profit distributed every six months, that works out to approximately Dh25.30 per payment. The amount increases proportionately as the investment rises.
A Dh10,000 investment would generate Dh506 a year, or approximately Dh253 every six months. For Dh50,000, the figures would be Dh2,530 annually, or about Dh1,265 every six months.
If the stated profit rate remains unchanged throughout the five-year tenor, a Dh10,000 investment would generate Dh2,530 in total profit over five years, while a Dh50,000 investment would generate Dh12,650.
These calculations do not account for any potential transaction, trading or other applicable charges.
What exactly are you investing in?
A T-Sukuk is a Sharia-compliant government investment instrument.
Unlike a conventional bond, which pays interest, a sukuk provides investors with returns through a structure designed to comply with Islamic finance principles.
This sukuk is issued under the UAE’s Sovereign Retail T-Sukuk Programme and is backed by the UAE Government. The programme was established to give individual investors access to sovereign investment instruments that have traditionally been more commonly associated with institutional investors.
Participation does not require a large investment, with the minimum subscription set at Dh1,000.
How is it different from the first sukuk?
The main differences are the profit rate and the length of the investment term.
The first retail T-Sukuk, launched earlier this year, had a two-year term and an annual profit rate of 4.30 per cent. The second issuance has a five-year term and offers an annual profit rate of 5.06 per cent. Both pay profits every six months and have a minimum investment of Dh1,000.
Demand for the first offering significantly exceeded the amount initially available.
Investors submitted Dh445 million in orders against the original Dh50 million issuance, prompting the government to double the size of the offering to Dh100 million.
Smaller investors accounted for a significant share of that demand, with around 76 per cent of subscriptions worth Dh10,000 or less.
Do you have to lock your money away for five years?
Not necessarily. Five years is the maturity period of the new sukuk, but the securities are scheduled to begin trading on Nasdaq Dubai on October 1, following allocation and settlement.
This creates a secondary market, potentially allowing investors to sell their holdings before maturity rather than waiting the full five years.
There is an important distinction, however: selling before maturity is a market transaction and does not mean your original investment will automatically be returned in full.
Once a sukuk begins trading, its market price can fluctuate. An investor who sells before maturity could receive more or less than the amount originally invested, depending on the prevailing market price.
Holding the sukuk until maturity means investors do not have to sell at the prevailing secondary-market price, subject to the terms of the issuance.
Who can subscribe from the UAE?
The offering is available to eligible UAE nationals and residents.
Investors need a valid Dubai Financial Market Investor Number, known as an NIN, as well as a registered mobile number. Those who do not already have an NIN will need to obtain one before completing their subscription.
Subscriptions can be made through the DFM eIPO platform, the iVestor app and the DFM app, as well as through the digital channels of participating banks.
Emirates NBD is the lead receiving bank. Emirates Islamic, Abu Dhabi Islamic Bank, Ajman Bank, Mashreq, Abu Dhabi Commercial Bank and First Abu Dhabi Bank are also participating receiving banks.
What happens after you apply?
Subscriptions close on September 28, followed by allocation on September 29.
Settlement and refunds of excess subscription amounts are scheduled for September 30, with the sukuk due to begin trading on Nasdaq Dubai on October 1.
Allocation is worth keeping in mind because applying for a particular amount does not guarantee that an investor will receive the full amount requested.
The first issuance showed why this can matter. Demand reached Dh445 million even after the eventual issue size was increased to Dh100 million.
For UAE residents, the second issuance changes two key terms from the first offering: the investment period increases from two years to five, while the annual profit rate rises from 4.30 per cent to 5.06 per cent. The minimum investment remains unchanged at Dh1,000.
